Administration and expenditure of the Chancellor's departments, 2008-09 - Treasury Contents

Examination of Witnesses (Questions 400 - 419)



  Q400  Sir Peter Viggers: At the end of the day I assume the directors of a company are bound by their Companies Act obligations.

  Sarah McCarthy-Fry: Yes.

  Q401  Mr Tyrie: In these meetings there are also the interests of large minority shareholders to consider. Do they attend the quarterly meetings?

  Sarah McCarthy-Fry: I will need to come back to you on that one. I will let you know.

  Q402  Mr Tyrie: Goodness me! I am surprised you do not know the answer to that. That would seem to be pretty fundamental. We are talking about people's pensions which are tied up in these. We have no idea whether the minority shareholders have had an opportunity to comment on the bonus policy and the effect that would have on long-term value of the firms.

  Sarah McCarthy-Fry: That would be between UKFI and the minority shareholders. I am talking about the relationship that we have as majority shareholders with UKFI. I will need to come back to you on that.

  Mr Tyrie: Will you come back to us and let us know? Thank you very much.[1]

  Q403  Mr Plaskitt: The Annual Report and Accounts from HM Treasury discussed the Asset Protection Scheme and mentioned the targets that were given to RBS and to Lloyds for additional lending. Who set those targets?

  Sarah McCarthy-Fry: They were agreed between the Treasury and RBS and Lloyds. I do not know exactly who set them.

  Q404  Mr Plaskitt: But someone came up with the numbers.

  Sarah McCarthy-Fry: It was a number that was felt appropriate.

  Q405  Mr Plaskitt: By whom?

  Sarah McCarthy-Fry: I do not know who came up with them.

  Q406  Mr Plaskitt: You do not know why it was those particular numbers: why £25 billion for RBS and why £14 billion for LBG? I just wanted to know the reasoning behind those particular numbers.

  Sarah McCarthy-Fry: I am afraid I do not know the answer to that. We can get a note to you.[2] I do not know the reasoning or why those particular numbers came up. That is the numbers that were agreed between them.

  Q407  Mr Plaskitt: Are numbers being devised for lending targets for those banks for 2010?

  Sarah McCarthy-Fry: We are looking at similar lending commitments in respect of the 12 months up to 2010.

  Q408  Mr Plaskitt: Is there a process working that will come up with a specific number again?

  Sarah McCarthy-Fry: Yes.

  Q409  Mr Plaskitt: Even though the report says it depends on market conditions and obviously we do not know in detail market conditions ahead of time.

  Sarah McCarthy-Fry: Assuming a steady state, it will be a similar number. If the £14 billion and the £25 billion were the appropriate numbers within those market conditions that would be the proportion, and then depending on market conditions.

  Q410  Mr Plaskitt: So it will not be the same numbers.

  Sarah McCarthy-Fry: Not necessarily the same exact numbers.

  Q411  Mr Plaskitt: Will there be any sanctions imposed if those numbers are not met?

  Sarah McCarthy-Fry: Obviously we are hoping that we can get through those numbers. There is additional work being done to establish, if the conditions are not met, is it because the banks are not fulfilling their side of the bargain or is it because there is not sufficient demand? That would have to be gone through first. There is a sanction in the access to the Credit Guarantee Scheme. That is the only formal sanction there is but obviously we are working through other things.

  Q412  Mr Todd: One of the DSOs is to professionalise the finance function in government. At the moment only 22% of bodies which are required to report accurately on a timely basis monthly do so to the standards required. Is that reasonable?

  Sarah McCarthy-Fry: No, of course it is not reasonable. That is why there is the process of professionalising—

  Q413  Mr Todd: But we have been attempting to professionalise this area for some time.

  Sarah McCarthy-Fry: Yes, and work is ongoing. We have the requirement that all the directors should be qualified with a financial qualification.

  Q414  Mr Todd: Are we there yet?

  Sarah McCarthy-Fry: I believe so.

  Q415  Mr Todd: I seem to remember the MoD was one of the big exceptions.

  Sarah McCarthy-Fry: I do not know about the MoD. This was referring to the Treasury, and certainly within the Treasury I believe we are now there.

  Q416  Mr Todd: Bearing in mind the Treasury's important responsibility to manage public expenditure, accurate reporting from people who know how to do their job professionally is surely a pretty critical part of your function.

  Sarah McCarthy-Fry: Yes, it certainly is. It is why it has had a large focus, in that we want to make sure that our financial reporting is accurate and meets all the required standards.

  Q417  Mr Todd: That focus seems to have been rather dim if the outcome seems such a gentle one so far.

  Sarah McCarthy-Fry: It does not mean we are not on the right track.

  Q418  Mr Todd: What are we doing to do to improve that further?

  Sarah McCarthy-Fry: We are initiating a review of the Corporate Governance Code. We are making sure the finance directors are able to improve the financial management across government. They are going to introduce benchmarking and to implement a self-assessment tool through CIPFA that we can monitor.

  Q419  Mr Todd: One of the obvious reasons why this is important is that we are entering a period of greater stringency, in which the management of resources is even more critical than it has been before. If we were not getting it right in what were gentler times in the reporting period involved, it is not very encouraging, is it?

  Sarah McCarthy-Fry: The benchmarking will be important, because then we can see where the focus needs to be addressed. Using the self-assessment tool will enable us to monitor that.

1   Ev 110 Back

2   Ev 110 Back

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